Integrity Re 2018 cat bond shrinks slightly to $79m

The new Integrity Re Ltd. (Series 2018-1) catastrophe bond transaction, which is being sponsored by Florida headquartered primary insurer American Integrity Insurance Company of Florida, Inc., has shrunk slightly while marketing, we understand, as the riskier tranche of notes was reduced in size.
The deal sees American Integrity Insurance seeking fully collateralized reinsurance protection from the capital markets with the help of Hannover Re acting as ceding reinsurer, in a cat bond that will provide collateralized reinsurance protection against losses from Florida named storms and severe thunderstorms across a four-year term on an indemnity trigger, per-occurrence and cascading basis.

The Integrity Re Ltd. special purpose insurer (SPI) is issuing two tranches of Series 2018-1 notes in this transaction, one larger and featuring more remote risk and the other considerably riskier and smaller as well.

A $75 million tranche of Integrity Re Series 2018-1 Class A notes will provide Florida named storm reinsurance protection to American Integrity. The notes have an initial expected loss of 1.27% and were marketed to cat bond investors with guide pricing in a range from 3.75% to 4.25%. We understand that the pricing has now been fixed at the bottom-end of that guidance, at 3.75%.

The second tranche launched as a $10 million Integrity Re Series 2018-1 Class B layer, that will provide reinsurance protection against both Florida named storms and Florida severe thunderstorm risks. This tranche is much riskier, having an initial expected loss of 5.74%.

We’re told that this Class B tranche is now expected to settle at just $4 million in size, perhaps reflecting a lack of investor demand for it. The launch pricing for this tranche was not available to us, but we’re now told it is likely to be priced at 9.5%.